New Market Report Now Available: Switzerland Commercial Banking Report Q3 2011

June 10, 2011 - PRLog -- Profits Down, Challenges Remain  Our overall assessment of the outlook facing Swiss banking sector is largely unchanged from our Q211  report. We continue to see both UBS and Credit Suisse facing stiff regulatory challenges over the coming  quarters as both banks are required to bolster their balance sheets to a greater extent than their  international competitors. In turn, we anticipate profitability remaining under pressure for some time to  come and expect both banks to put greater emphasis on their private client and wealth management  divisions due to a reduced capacity to generate income from proprietary trading activities.  In The Black  Both of Switzerland's big banks reported a drop in first-quarter profits compared to a year earlier. UBS  posted Q111 net income of CHF1.81bn, down by 18% from CHF2.21bn a year earlier. Although UBS  managed reduce salary costs by 6% over the year, revenues fell by 13% due to the Swiss franc eating into  the value of overseas activities and thinner trading volumes.  In a similar fashion, Credit Suisse's first-quarter income fell by 45%, with thinner trading volumes and  the strength of the Swiss franc again being blamed for the poor performance. Net income came in at  CHF1.14bn in Q111, compared to CHF2.06bn in Q110. Core revenue was down by 13% year-on-year (yo-  y).    Money Returns  Although profits slipped in the first quarter, one dynamic that gave cause for optimism was the  performance of both banks' wealth management divisions, in particular their ability to attract new funds.  Strong performance in higher-margin activities such as private banking and wealth management is  essential if the banks' are to maintain profitability around current levels while proprietary trading is  curbed in response to tighter regulation and higher capital requirements.    Credit Suisse's assets under management increased by 1.3% y-o-y, reflecting asset growth and net new  money. This gain came on top of the strong inflows the bank enjoyed in the immediate aftermath of the  global financial crisis as it benefited from not requiring a government bailout. In contrast, UBS  experienced a dramatic outflow of funds (over CHF200bn) due to the bank's near-collapse during the  global crisis. UBS appears to be enjoying some success in reversing such outflows, attracting CHF11.1bn  in new money under management thanks to a strong drive to draw client funds from Asia. Such  improvement will need to continue at Credit Suisse and UBS as traditional profit drivers, particularly  proprietary activities, are curbed in response to regulatory changes.  Regulatory Challenges Ahead  The Swiss authorities remain committed to implementing capital requirements that go beyond the  international standards set by the Basel III accords. UBS and Credit Suisse are to be required to hold at  least 19% in total capital, of which 10% must be common equity. This is far in excess of the 10.5% total  capital (7% of which must be common equity) required by Basel III. The banks are adopting slightly  different approaches to bolstering their balance sheets. Credit Suisse issued contingent convertible bonds,  instruments that convert into equity if the bank's equity drops below a certain level, in February 2011.  UBS intends to build capital by not paying dividends and retaining profit.    Regardless of the different approaches to raising capitalisation levels, such high capital levels, while  enhancing the stability of the Swiss banking system, will weigh on profitability. Although UBS managed  to hit its 15-20% return on equity (ROE) target in Q111, achieving 15.5% ROE, it does not look likely  that such performance can be sustained. Credit Suisse reported underlying ROE of 18.8% for Q1, well  ahead of its 15%+ target. However, the fact that Credit Suisse reduced its ROE target in February from  18%+ underscores our view that higher capital requirements will restrict profit growth in the years ahead.

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Full Report Details at
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Partial Table of Contents:

Executive Summary
- Table: Levels (CHFbn)
- Table: Levels (US$bn)
- Table: Levels At February 2011
- Table: Annual Growth Rate Projections, 2011-2015 (%)
- Table: Ranking Out Of 59 Countries Reviewed In 2011
- Table: Projected Levels (CHFbn)
- Table: Projected Levels (US$bn)
SWOT Analysis
- Switzerland Commercial Banking SWOT
- Switzerland Political SWOT
- Switzerland Economic SWOT
- Switzerland Business Environment SWOT
Business Environment Outlook
- Commercial Banking Business Environment Ratings
- Table: Switzerland's Commercial Banking Business Environment Rating
- Commercial Banking Business Environment Rating Methodology
- Table: Developed States Commercial Banking Business Environment Ratings
Global Commercial Banking Outlook
- Table: Banks' Bond Portfolios, 2009
- Table: Developed States Commercial Banking Business Environment Ratings
- Table: Comparison Of Loan/Deposit, Loan/Asset And Loan/GDP Ratios
- Table: Anticipated Developments In 2011
- Table: Comparison Of Total Assets, Client Loans And Client Deposits, 2009-2010 (US$bn)
- Table: Comparison Of Per Capita Deposits, 2010e (US$)
- Table: Interbank Rates And Bond Yields, 2010-2011
Europe Banking Sector Outlook
Switzerland Banking Sector Outlook
Economic Outlook
- Table: Switzerland Economic Activity, 2008-2015
Company Profiles
- Credit Suisse
- Table: Stock Market Indicators
- Table: Balance Sheet (CHFmn, unless stated)
- Table: Balance Sheet (US$mn, unless stated)
- Table: Key Ratios (%)
- Aargauische Kantonalbank
- Berner Kantonalbank
- Table: Stock Market Indicators
- Table: Balance Sheet (CHFmn, unless stated)
- Table: Balance Sheet (US$mn, unless stated)
- Table: Key Ratios (%)
- Luzerner Kantonalbank
- Table: Stock Market Indicators
- Table: Balance Sheet (CHFmn, unless stated)
- Table: Balance Sheet (US$mn, unless stated)
- Table: Key Ratios (%)
- St Galler Kantonalbank
- Table: Stock Market Indicators
- Table: Balance Sheet (CHFmn, unless stated)
- Table: Balance Sheet (US$mn, unless stated)
- Table: Key Ratios (%)
- Zurcher Kantonalbank
- Banque Cantonale Vaudoise
- Table: Stock Market Indicators
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Full Table of Contents is available at:
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Fast Market Research is an online aggregator and distributor of market research and business information. We represent the world's top research publishers and analysts and provide quick and easy access to the best competitive intelligence available.